Posted
by
timothy
on Sunday July 10, 2011 @02:33PM
from the spend-all-you-want-we'll-print-more dept.

fysdt writes with this from an article on ABC News: "The International Monetary Fund's new chief foresees 'real nasty consequences' for the U.S. and global economies if the U.S. fails to raise its borrowing limit. Christine Lagarde, the first woman to head the lending institution, said in an interview broadcast Sunday that it would cause interest rates to rise and stock markets to fall. That would threaten an important IMF goal, which is preserving stability in the world economy, she said. The U.S. borrowing limit is $14.3 trillion. Obama administration officials say the U.S. would begin to default without an agreement by Aug. 2."

can people expect to wage 2 ground wars, and 1 air war, while giving tax cuts to the wealthy.

Obviously, the wealthy do. I believe this is the first time that the US has participated in an extended war w/o raising tax rates. During WWII, the income tax rate reached 94% on income over $200k, from Income tax in the United States, History of top rates [wikipedia.org]:

During World War I, the top rate rose to 77% and the income threshold to be in this top bracket increased to $1,000,000 ($16 million 2007 dollars); after the war, the top rate was scaled down to a low of 24% and the income threshold for paying this rate fell to a low of $100,000 ($1 million 2007 dollars).

During the Great Depression and World War II, the top income tax rate rose from pre-war levels. In 1939, the top rate was 75% applied to incomes above $5,000,000 ($75 million 2007 dollars). During 1944 and 1945, the top rate was its all-time high at 94% applied to income above $200,000.

The top 10% of the population has more than 70% of the wealth in the country. The top 1% has almost 40% of the wealth. The bottom 40% has.2% of the wealth.
Like it or not, the rich are going to get soaked to pay the debt, because over the last 30 years they took most of the money from the rest of us.

You could literally confiscate every dime the wealthy earned last year, and still be nowhere near closing our yearly deficits.

You could easily repeat a stupid and easily debunked lie over and over, and find millions of suckers who believe it.

I first heard Anne Coulter say it a couple of days ago and it struck me as one of those technically true, but utterly irrelevant, slogans politicians pay PR firms to come up with.

The only way I can see it being true is if it is taken literally - confiscate everything the "wealthy" earned, but all of the other taxes we currently collect from the middle class -- those don't count.

We've had the tax cuts for going on 10 years, and the jobs situation got WORSE. The tax rate on the wealthiest Americans is at the lowest point since the 50's. Without the security of America, those companies wouldn't even exist in their current form, so spare me the crocodile tears for the million and billionaires. If the middle class can be asked to fight their bullshit wars, the rich should have to fucking pay for it.

Yeah, because there is never momentum in an economy. It couldn't possibly be that the 2.5% increase in unemployment is from the momentum of the recession that occurred on Bush's watch when Republicans let two major bubbles form in the housing and financial markets. At least under Obama, the hemorrhaging of jobs stopped.

You do realize that the shit was just hitting the fan as Bush was leaving office, right? And that when the President took office the economy was more or less in free fall. In that context only a great fool would suggest that it wasn't Bush's fault. The President deserves a great deal of credit for being able to keep the unemployment rate that low considering where he started.

Tax cuts were a significant portion of the problem, they weren't the only problem, but they were a significant portion of the problem. It's doubtful that we'd still be in the mess we're in had Bush not left us with nearly $10tn worth of debt, we could have gotten another round or two of stimulus with that money. But the biggest issue is that Bush left us with two very expensive wars which were providing us with very little bang for the buck.

On top of that under Bush the DoJ effectively stopped investigating antitrust violations and he was very much opposed to the sorts of regulation which would have prevented the sort of catastrophic down turn that later showed up as he was leaving.

Except for state and local income taxes, payroll taxes, property taxes, sales taxes, and excise taxes, many of which are regressive taxes that have disproportionate effects on the poor, rather than the rich. And also federal income tax, which isn't nearly so avoidable as you think.

But hell -- I'd be happy to shoulder a higher tax burden if we were also soaking the rich and if we were using that tax revenue in a better fashion. We don't need to waste money on our incompetent military (not good for much other than blowing crap up, letting situations degrade, and keeping the USSR from taking over Europe), but we could sure use a good single-payer healthcare system.

Fool, no one is saying "tax the hell out of the biggest corporations"-- just bring them back to where they were before the unnecessary tax cut. Cutting costs, firing workers, and freezing salaries will happen regardless.

You stupid fucker. You think CEOs pay their employees out of pocket? Hell no. Corporations pay peoples' salaries. Raising taxes on the rich has absolutely no impact on this. But they've drummed their lies into your head enough that you're now afraid to tax them, which is why hedge fund managers pay a lower tax rate than their IT staff, despite earning about 50 times as much.

I don't think you have your finger on the pulse of America (what little pulse there is). Unless you're going to acknowledge the same civil rights to gay people that everyone else has on a federal level, or you're going to shut down the NFL, or you're going to ban latte's, there is nothing that will ever cause the US to erupt. If that video of our troops unloading on unarmed people with really pathetic commentary on the open mics didn't cause a riot, nothing will. If Goldman Sachs executives running the treasury giving massive bailouts to Goldman Sachs didn't cause riots, nothing will. If going to war for almost a decade against a country that didn't attack us for reasons that were later acknowledged to be manufactured and false (and that we're still participating in) didn't cause riots, nothing will.

We all know they are going to raise the debt limit. Every time this comes up, whichever party is in power votes to raise the limit [ritholtz.com]. Whichever party is not in power delays the vote to the last minute, using the occasion for political grandstanding.

It would frankly be wonderful if enough Congresscritters had the chuzpa to not raise the limit. Force some fiscal responsibility, even if it is probably too late. But, no, this is the Congress that still hasn't passed a budget for 2011 - they just gave up, and there is every sign that there will be no official budget for 2012 either.

It would frankly be wonderful if enough Congresscritters had the chuzpa to not raise the limit.

Yeah, it would be great if our credit rating were downgraded. That would be wonderful. Paying extra percentages on the 14 trillion we already owe and can barely pay is a wonderful way of staying afloat. In fact, I stay up nights thinking "Gee, I wish the value of the dollar entered the sort of massive decline that Mexico saw in the 90's."

What I really wish is that the Republicans or Democrats actually believed that a balanced budget was worthwile. I'm sorry, if you're willing to axe a historic deal because you don't want to close tax loopholes on the most profitable industry in America (all the while cleaning up after its oil messes), then you're just a posturing nit. Oh no, we can't lower military spending. Oh, Social Security is sacrocent. And while we're at it, let's extend those tax cuts for the rich again, and keep taxing income from stock accounts at half of what normal income is taxed as.

You're kidding, right? Congress has been dominated by giant pussies for decades, who do whatever the president demands of them. They may bitch and whine and moan, but when it comes down to the voting and the actions, they're less a counterbalancing branch of the government than they are the lapdogs of the president (whichever president it is at the time).

Frankly, it's time to fucking grow up and stop spending more than we make. It's bullshit to say "you can't point that gun against our head!" when referring to refusing to raise the debt ceiling. Continuing to have unrestrained spending forcing us to continue raising our debt is itself a threat held against our own heads. When someone has a spending problem, you cut up the fucking credit cards. I don't see how difficult this is for us to understand.

I mean, really, what do you expect to happen? We're going to raise the ceiling this time around and everyone will promise to "be really good" next time? The democrats will promise not to spend zillions on more bullshit social programs and the republicans will promise not to spend billions on bullshit military actions? Really? If we just promise to let them go over this one more time?

This is the same fucked up "logic" that the public was fed to justify bailing out corporate America. Feed them bullshit through the media until everyone was worked up into a frenzy. We can't afford NOT to hand out seven trillion dollars! If we don't, the entire country will be bankrupt and you will be eating road kill off the streets as your house burns to the ground and your entire family contracts malaria!

All these endless threads here about "conservatives durp durp" and 'liberals durp durp". Let's call it what it is... fucktards and fucktards. And both groups of fucktards are trying to scare the shit out of you to continue raping us all. And we're fucking falling for it, like morons.

It's clear what's going to happen. We'll raise the ceiling into the indefinite future and we'll continue to spend more and more into the indefinite future, until our deficit becomes so large that it topples over and the whole country is done. There will be a breaking point, eventually. We have to get control of this bullshit, sooner rather than later. But... we won't. And so we'll get what we deserve.

You obviously lap up the right propaganda and spew it all confused and wrapped up in your own world and view of events.The June 2011 economics analysis data shows that the US has actually been much better than its target deficit reduction for 2011 -- in effect so much so that the US is fully expected to achieve its deficit reduction targets for 2012 with no need to take "harsher" decisions. Perhaps you would like to read the reports on Economic indicators before firing off your words.

The Government didn't bail out the banks because it was fully tied up with the fat cats; the Government had NO choice but to facilitate the bailout, because BANKS ARE INTERCONNECTED, hence so were the millions of mortgages, loans, debts, and receipts. Had AIG collapsed in the free market style -- the shock would have been so strong to the economy that we would really have needed an event like WWII to rescue us out of it.

And don't forget -- the bailout program was actually done in the last days of President G.W. Bush.

And the US is not like your family that you need to lecture about "cutting" spending and lecture on prudent usage of resources. YES that needs to be done -- but you are holding the fragile recovery hostage by holding the debt ceiling limit steady. If the US' AAA credit rating is harmed due to this posturing the interest will pile up so fast that it will end up increasing your debt, and such a strong shock to the economy that it will take decades to recover.

But the biggest reason is that with such posturing, the US will no longer whet the appetite of risk averse investors. In effect, money that used to come back here in case of global crises will no longer come back here. With this trust erosion the US will lose its dominance in the Global Economy. Which other country will step in? We do not know for sure, but the fact is that US will not be able to reclaim that title because of its own fragile recovery -- the net effect; you can say bye-bye to US leverage and capital influence.
So get your head out of that all-knowing sand hole, read the actual Economic data before you throw around your wisdom!

The IMF will bail you out, and they will have their list of conditions as to how the US should be run.

With what money? The reason the IMF insists that the U.S. must raise its debt limit is because the money it uses to bail out other countries mostly comes from the U.S. government. If the U.S. does not raise its debt limit it will not be able to borow the money to fund the IMF.

Dividends are related to how much profit the company is making; a drop in the stock market alone will not cause a drop in dividends.

People tend to be afraid of stock market drops, because they have the perception that the drop in the stock market caused the great depression. It did not, it merely accompanied the depression.

This is more than a theoretical issue: people often focus on trying to improve the stock market number, instead of trying to improve the economy as a whole. Trying to raise the stock market by printing more money, by borrowing more money, is counter-productive and causes problems.

Somehow there is no problem for the courts 'interpreting' the law when it concerns private citizens.

So if you murder somebody, I don't see them trying to do an interpretive dance around that fact and come up with a different explanation on what that law really says.

But when it concerns the law, which is supposed to apply to the government, now all of a sudden we need an 'interpretation'?

That's a bunch of nonsense.

SCOTUS is not supposed to be interpreting the law, he is supposed to be upholding it.

There is nothing to interpret there. When somebody says: validity will not be questioned. They mean just that. That it is valid, and it cannot be declared invalid by the government. That's all there is to it. It doesn't mean it must be paid at all. But it's valid.

Same with the rest of the Constitution - it does not need interpretation, it needs honest fucking people being judges, so they would uphold the fucking law.

The US Constitution says the government isn't allowed to default on the debt. But the Debt Limit Law isn't in the Constitution - it's just a law that says that Congress doesn't authorize borrowing more than $X, and requires some actions if we hit that limit, including not spending more money than we're taking in. It's questionable whether it really even applies, because Congress has passed a budget law since the last Debt Limit Law update, and that budget says they're going to be spending more than they're taking in so they're going to be in more debt.

So what can the Executive Branch do when they hit the debt limit?

- They could stop paying back debts that come due, but that's not only unconstitutional, it's not going to help the deficit problem any.

- They could stop paying Social Security checks, and try to make the Republicans take most of the blame for your grandma being thrown out on the streets, hoping that the Democratic Party leaders don't get stomped in the next election by upset Democrats.

- They could cut all the Republican Party's favorite programs, especially most of the military contracting boondoggles. (Unfortunately, some of those can't be done instantly, especially shutting down the wars, and Obama doesn't want to be accused of losing the wars for political reasons, and he seems to like the TSA and Homeland Security.)

- They could declare that the most recent Budget supersedes the older Debt Limit law.

- They could close the Washington Monument!

I'm guessing that they'll probably do a combination of politically unpopular spending cuts and Federal pay cuts and try to blame the Republicans, plus the Washington Monument's going to be doomed until there's a solution. I don't think they'll default on the debt, not just because it's unconstitutional, but because it seriously degrades their chances of borrowing any more money in the near future, which they want to be able to do - Obama's threatening that, but I think it's more of a political game of chicken.

But let me provide an important perspective: the people who are deciding on this "debt ceiling" ruse are in Washington DC right now, so clearly the so called 'ceiling' will be raised, don't worry about it, they are just fucking with you.

So when to worry? When the people in China and all over who hold the debt decide that your ceiling shouldn't be raised.

Of-course for the past 6 months the Fed was buying 100% of all new debt (QE2 was

- Not one penny of US debt has been repaid for 51 years: the last time US government funded debt actually decresed on a year-over-year basis was 196097% of today's funded debt has been accumulated since August 1971 - the end of the Bretton Woods era by Nixon, and the terminal delinking of all fiat currencies from any and all hard assets, ushered in the era of modern-day hyper-debt insolvency- Obama projects 2.5% Fed Funds rate in budget calculations through 2020. Average Fed Funds rate since 1980: 5.7%; Since 2008: 0.00%, If average 5.7% rate was used, projected US deficit would increase by another $4.9 trillion by 2020- Obama projects 4.2% growth rate over next 3 years. If a normal growth rate of 2.5% is used, deficits would increase by another $4 trillion by 2020- The US government borrows 40-50 cents for every dollar it spends. A balanced budget would mean cutting government spending in half.- Implementing a balanced budget would not reduce current debt outstanding. It would merely stop it from growing.- Over the past three fiscal years US debt grew by over $1.5 trillion per year: this is more than three times the record annual debt increase in any previous year in US history- Last night deficit reduction targets were cut from $4 trillion to $2 trillion over the next decade, in exchange for a $2.4 trillion debt ceiling hike, which will last the Treasury until the next presidential election. Said otherwise, the Treasury needs to fund a $2.4 trillion hold over the next 15 months. Over a decade this come to $20 trillion: ten times more than the proposed deficit reduction.

In other words, cut the US budget in half to stop the situation from getting worse. Then start working on your debt mountains.

You can increase revenue and that will help fix the budget issues. Sure we spend too much; not arguing that. We can afford to fund this budget without the end of the world happening -- don't listen to the propaganda. It will not kill you if your taxes match your spending-- and if they did, then you might spend more wisely...

A big chunk of the current budget issue is the economy tanked and the revenue is based upon the economy-- so if you CREATE JOBS even at the cost of increasing debt it will pay back quick

-Obama added the wars to the budget so all that military spending that was 'off the books' is now on the books making the budget look much larger when it was there before but was outside the budget!

-When we have a surplus, state or federal there is a big push from our fools to give tax rebates and tax cuts INSTEAD of paying off the debt. This is what we do each time so the debt grows.

-The deficit and debt are two different things people confuse too often. Fixing the deficit does not fix the debt and the interest on the debt only compounds creating more deficit problems.

-Cutting the budget in half will not stop the situation from getting worse. Breaking even will not stop it-- the only way for things to not get worse is if we pay back the interest on the debt and actually break even.

-Trickle down economics do not work; it has a bad reputation... Well, the terms are considered bad-- we've simply shifted the terms while still supporting supply side economics with Democrats slowly warming up to it as well. What is clever is the use of cover terminology that can be swapped out after it takes too much damage. Today its all veiled in terms of jobs-- the rich provide jobs etc. Its just another way of selling the same old failed economics which made huge gains around the Nixon era when the powerful started think tanks to legitimize their positions (the beginning of the modern corporate info war.)

There are other issues leading to a collapse around 2020 besides OUR money mismanagement. Its all interconnected to a point where repair is impossibly difficult.

That's not really insightful, anybody knowledgeable enough about economics to be head of the IMF would have come to the same conclusion. In fact I came to that conclusion and I've had very little training in economics. It's one of those the sky is blue observations.

The rates that investors typically demand for their money is related to the perceived risk. Right now that risk is low because investors believe that the US will do whatever it needs to do to keep paying those bonds off. But, if the debt ceiling isn't lifted and or we stop paying our bills that would undoubtedly trigger investors to demand more for their risk.

It takes a certain level of delusion to believe that there is something special about the US which would prevent that from happening if we start defaulting on our debts. And unfortunately, right now US Savings bonds and the like are still the best bonds to invest in, if the GOP has its way, they're likely to not be worth the paper they were printed on.

The solution to debt is not more debt. At some point someone is going to have to be grown up about this. It would be nice if they were grown up sooner, so that it hurts less. I'm not holding my breath.

Also, the US makes enough tax income to pay interest on it's current debt. In other words, "default" is not a consequence of refusing to raise the debt limit. Something will have to go unpaid, but it doesn't have to be the USA's debt interest. People are running fast and loose with the meaning of the word "default". Don't let them take you in.

Social security is an unfunded liability, currently funded through a Ponzi scheme, which is just now entering the "not enough new suckers" phase. (No, really, it is. There is no SS "trust fund". I can write checks to myself all day; it doesn't mean I have more money.)

Medicare is a disaster in terms of cost.

The US spends each day double what it takes in in taxes.

The US decided to take what was entirely a private problem (big banks would go bankrupt because they made bad bets on housing) and turn it into a government problem by bailing private entities out that should have gone bankrupt, and then guaranteeing lots of other debt. This actually prolongs the problem and makes it worse.

The Federal housing entities are some of the worst culprits, helping blow the housing bubble, and now pretending they are not bankrupt. They will have to implode and be shut down at some point. Bye bye Fannie and Freddie.

The inmates are running the asylum. It seems the solution to being seriously in debt is to spend more. There is also apparently a magical money multiplier that makes government spending somehow blessed and better than private spending. We have economists making arguments based on very dubious differential equations in which they carefully never specify their boundary conditions. The well known "economists" are more about justifying their political leanings than any actual scholarship.

Public union pensions for federal and state workers are unfunded to the tune of tens of trillions of dollars. These will never be paid out.

All of these chickens will have to come home to roost. Arguing about Democrats or Republicans or Left or Right completely ignores the fact that reality will eventually force a solution.

The current administration will do all of the worst possible things they could do. Not because they are evil, or Democrats, or whatever, but because bureaucracy is about protecting the way things are now. Their universe does not include actions which could fix this problem, because they would change the power balance and the money flows upon which they depend. The Republicans are being forced to pay lip service to the concept of being fiscally responsible by entities such as the Tea Party, but I can't see them doing anything real. They too are bureaucrats, and they too have rice bowls to fill.

If any entity did force some kind of resolution, it will be vilified by all and sundry, because resolution involves the death of a million sacred cows at all levels of this society. There's no upside for a politician in being vilified for doing something that will hurt this much, even if it's the right thing to do.

It would be nice to say that we get to pick whether we try to deal with it now, and maybe have a little control, or later, when it will be completely out of our control. In reality, I can't see that choice having any chance of being presented.

The Financial Crisis never ended. It was just temporarily papered over by insane government spending. Now we just have a bigger can to kick down the road.

A massive failure is coming, whether it be a cascade failure, or death by a thousand cuts. I have no idea when or how. I wish it would happen sooner so I can start concentrating on rebuilding, instead of trying to dodge falling pianos while the world at large tries to pretend we're in a light summer rainstorm.

You can borrow until people decide you have no chance of paying back, then they refuse to lend you any more and demand their money back. This is not about partisan politics, so give it a rest. Reagan and Bush sure helped the USA down this path, but it is true that the Obama administration has been spending at about double the rate of the previous administration, and people who buy government debt (and thus are loaning the USA money) are noticing, and they are worried. If you really want someone to blame, bl

How many banks have told people that Oh, you are in debt. No problem, take on more debt! That will fix your problem!

The only reason why they are suggesting this is because they want every country they can to go bankrupt, and privatize the infrastructure of the country afterwards.

See what they are doing to Greece? Those idiots in Greece voted to increase the debt limit and now the IMF is asking for some of the islands, their bridges and historic works of Art to be used as collateral to private foreign interests.

By the time the IMF gets done with Greece, the citizens of that country won't even own their own water works, Hospitals or government buildings.

The IMF will own everything.

Now, the IMF has its sites set on the USA. By the time they get done, we won't even have a national park anymore, it will be owned by IMF private investors.

The IMF is the same old bunch of people who have been shunned around the world for the misery they bring to the common person in any country that they have helped themselves to.

Most recently, see how the South American/Latin American countries rejected them and their so-called austerity measures - the social sector cut backs that would have brought million into poverty and taken services away from those that needed them most, were averted simply because the governments in those countries did not believe the scare mongering from the IMF.

Today the IMF seeks a place for itself in a world that sees them for the scam they are and so now they are trying to "re-image" and "re-invent" their "role" in the world, trying to bait everyone and anyone so that they can start their games anew.

"There's class warfare, all right, but it's my class, the rich class, that's making war, and we're winning." Warren Buffet. His tax rate is lower then his secertary. They pay more then the none rich, because they make retardedly huge amounts of money, but for some reason their taxes as a percent of income is much lower then those of the middle class.

False. Rich people don't make money from wages. They make money from investments, dividends, and bond interest. That's why the super rich pay almost no tax (and why C-levels get paid in stock as opposed to salary). In the US we tax income from work, but we do not tax income from wealth.

False. Rich people don't make money from wages. They make money from investments, dividends, and bond interest. That's why the super rich pay almost no tax (and why C-levels get paid in stock as opposed to salary). In the US we tax income from work, but we do not tax income from wealth.

We tax all forms of income, including investments, and then sometimes we'll slap taxes on top of those taxes. You've never heard of capital gains taxes? We often tax wealth twice. First we'll tax corporate profits, and then we tax those same profits in the hands of private shareholders. When corporations get away with not paying taxes... GE is a good example here... it's because they've made crony capitalism deals with the government, often getting huge tax credits for things like "green initiatives". This is why I want an across the board flat tax on all first time income. Not only will everyone, rich and poor, have skin in the game, it'll stop the insane practice of Congress using taxation to shape consumer behavior to their political liking.

Not true. I'm middle class and my percentage of taxes is less than 15%. Rich people pay above 30%. That's why it's called a progressive tax system.

Unlikely. My county sales tax is about 5% of the fraction I spend retail, and my property tax alone is about 3% of my gross annual income. And the state got about 4% of my gross annual income. Not counting the feds, or excise or use taxes, I'm already approaching 10%.

Its possible to structure your lifestyle to match the current social engineering tax code, but even then, probably not as low as 15%.

On a big enough scale, its overall a regressive tax system. One of the larger components is vaguely progres

It's government debt, eg bonds. Greece's interest rate is like 28%, The US is 2%. Greece's economy has basically gone titsup without default, but they're still expected to default. All the countries that are in trouble their bond rate skyrockets as soon as it looks like the bonds are going to be worthless.

What does the government do with money? It pays government employees (Miltary, Entitlement programs, infrastructure and creditors.) Creditors are other countries/people/businesses, both domestic and foreign. If the US defaults, expect the equivalent of a bank-run on bonds and stocks (equities) to get their money out of the US and into safer places like... Japan or Canada (even if it's only for a short period of time.) Take a look at the price of most of the S&P 500 1 minute before and after the jobs report last friday. So many stocks dropped by 10% for several hours before picking back up, now multiply that in a downward trend, that is what will happen.

Publicly traded companies with stocks worth less than 5$ get delisted, and that means those companies are toast. Companies that are private and those that have physical assets like Apple might survive, but a lot of the service industry does not have physical assets and they are history if the US government defaults. The irony here is that the banks would survive, but they would be calling in their loans, which means 30% interest for you.

Yes it can be doom and gloom, but it's inconceivable that the debt limit doesn't get raised. If by some chance the politicians screw the pooch and don't get it lifted, every last one of them better not be re-elected.

Most of the "entitlement programs" are Social Security and Medicare. That money doesn't pay "government employees", it pays our huge (and overpriced, and inefficient) private medical industry and the entire network of many private industries that old people spend their money on (beyond healthcare).

Also, banks can't just "call in their loans" ahead of schedule, or raise the interest on existing loans retroactively. There's no such thing as a "bank-run on bonds" because bonds aren't liquid until their maturity date.

I agree that the US defaulting on debt, or even just cutting the current stimulative spending (other than the military/intel $TRILLIONS, which are far more stimulative spent nearly any other way), would wreak havoc in the bond markets, and in the stock markets that can delete existing wealth. But let's be correct about how the economics actually work, and what actually works. That makes it easier to see what doesn't.

You do realize that the US debt limit has nothing to do with "the banks", right? It has to do with the US being able to pay its obligations to its citizens. Yes, some of those obligations are to banks, but not just US banks, and they are also to other countries. The US has never defaulted on its financial obligations and I'm sure now would be a bad time to start.

Er... this has almost nothing to do with what happened with the banks in 2008. In fact, it's about as unrelated as it is possible for one looming economic crisis to be to some recently past economic crisis. The fallout from the prior crisis is a major contributing factor, of course, but if there is any issue of "looting", it's going to be we the people, through our elected representatives in Congress, who do it.

This crisis is entirely voluntarily precipitated by our political leadership, albeit with the excuse that they believe *some* crisis is coming sooner or later. We are facing default not because we've spent more than was budgeted, or more than was appropriated, but because we spent money that as budgeted and appropriated but now Congress won't let the Treasury raise the money to pay the people we owe money to as a result.

What reason would the IMF have to do that? Their entire purpose is to direct resources away from people indirectly by using the state as the enforcer for their policies. They don't care to preserve stability any more than a farmer cares about the stability of his crop. It is only a means to an end and not even a necessary one for the end in question. There are plenty of other metaphorical fields, and while it is convenient that this one is tilled and planted, it is also near overuse.

there are massive hordes of credit default swaps against US debt out there right now.

credit default swaps are almost completely secret. nobody knows how many are out there. there could be a hundred billion, there could be 10 trillion.

if you allow the US debt to default, it will make the Russian and Asian defaults of 1997/1998 look like a kids birthday party.

When Lehman went under, the money market funds started to crash, and then the credit system started to crash. Yes, McDonalds was going to have problems meeting payroll.

the US government is like tens of thousands of Lehman Brothers, not in its operation but in the tentacles it has to every other financial product and financial system on the planet. credit default swaps against US debt are just the tip of the iceberg - and they are completely secret. we have no idea how many other products and institutions of the 'shadow banking system' are linked to US debt, or what the repercussions would be.

we would see currency devaluation on a massive scale. we could see entire companies disappear overnight. we could see entire countries central reserves emptied, overnight.

it could make the AIG bailout look like a child asking for 5 cents for a gumball.

it would be like taking a cigarette lighter and throwing it into a fireworks factory.

----

some people want to see the factory blow up. yes, it would be awesome, and serve the factory owners right for running such a sweatshop. but it is completely irresponsible to allow it to happen.

the only safe way to take apart the fireworks factory is brick by brick, slowly, over time. not in a massive explosion that will destroy an entire quadrant of the city.

Lagarde is also the politician who has been involved in a huge scandal over offering french troops to Tunisia's ousted dictator Ben Ali to suppress demonstrations.

In other words, she's perfect for the job. She supports dictatorship, systemic oppression of the masses to benefit rich elite and increase of power of private financial institutions at the cost of public ones.

Which is exactly what IMF has always stood for under all the glossy slogans.

just because she didnt want to let lehman fail doesnt mean she necessarily wanted to bail it out.

there are other ways to do it. when ordinary banks fail the FDIC takes them over, puts a few people in prison, pays off some creditors, winds it down, and keeps things going in an orderly fashion.

of course, since Lehman was an "investment bank" (not an ordinary bank) in the US, the FDIC, the Comptroller of the Currency, and the Fed did not technically have legal jurisdiction over it.

letting lehman just go bankrupt caused a lot of problems. institutions who had money saved there in europe couldnt get their savings out. also investors in lehman, like the "good as money" money market funds started losing value, which caused a mass panic and helped the credit markets seize up, which meant that ordinary business activity, like mcdonalds payroll, was threatened. it was like one of the last dominos to start the global run on the global financial system in sept 2008.

if i understand it correctly, she probably would have wanted us to 'go cowboy' on Lehman, and do something like have the FDIC take it over, even though it wasn't technically under FDIC jursidiction. in Paulsons book he talks about how he is continually hamstrung by what is allowable legally for him to do as treasury secretary. he is always worried about doing whats legal.

however, technically, we had no right to invade Iraq, to writetap american citizens, to set up secret prisons and torture POWs. why couldnt we bend the rules in this case? i think thats where she might have been coming from.

Am I the only one that is starting to think this default thing might not be so bad? We've tried bailouts, the banks said "thanks" and promptly foreclosed, we bailed out the ultracorps like GE who said "thanks!" and promptly sent the jobs to India, meanwhile the government is building new aircraft carriers and pissing money into the F35 black hole like the cold war was scheduled to restart next Tuesday and Americans are living in tents because they can't find work. Did I miss anything?

Maybe if we default we won't be able to keep borrowing money, imports will fall off the face of the planet, and we might actually have to start manufacturing things again? Just a thought. But so far we have done everything the bankers wanted and while they got a couple more yachts it certainly hasn't helped this country out, if anything their trickling on the American people has made things MUCH worse.

I really am starting to wonder if it is time for the fall, if it is time for our own Arab spring. it is obvious the elected officials will no longer listen to or obey the will of the people, not on the three wars killing our kids, not on the border leaking like a sieve, not on H1-Bs when there are 100 Americans or more applying for every job, not on anything anymore. maybe it is time for this system to go away and a new one to replace it, one that listens to the people. Because frankly I don't see how we can continue down this path without almost certain full scale class war.

"Because frankly I don't see how we can continue down this path without almost certain full scale class war."

We've been in class war for a while now, it just isn't obvious.

Try fighting your way up from a net worth of $0.00 and living in a homeless shelter up to the middle class. Most places won't hire you if you don't have a permanent address and reliable transportation. You'll end up getting kicked out of the shelter long before you have enough for a rent deposit, and most renters won't rent to you if you don't have a previous address or at least a good credit history. Then you come in to work smelling funny one day because you can't shower daily (no place to shower) and get fired because a customer complained. Now you've got to live on the street for a while before you can get into the homeless shelter.

Then you see every day in the paper that homeless shelters are running out of money while we're sending billions of dollars of aid to various countries, bailing out companies that knowingly risked and lost billions, billions of dollars just vanishing overnight, etc. That is class warfare.

We don't hesitate to hand out billions for free, but we aren't going to hand out billions to the people that really desperately need it right here at home.

It really saddened me that a lot of those free-healthcare-missionaries recently started setting up places here in the United States rather than in remote jungles of Cambodia because neither could afford basic health care.

If you saw anything coming before hand, you might still have a car left. You can sleep in your car. Your first X bucks go to a gym membership. That's your shower. Then your next $20 goes to one of those fancier "street boxes" where they can't tell what 188 Main St #24 is.

Rent + cars are the killers of today's economy - a lot of places have really skewed rents vs the jobs available.

Ugh, republican, yes? let me ask you something...why is your answer to EVERYTHING give the rich people more money? Town is burning, give rich people more money. No jobs? give the rich people more money. Sitting in the street with a broken leg and no money for a doctor? Give the rich people more money.

Ya know what? We've TRIED THAT for going on 30 fricking years now? Forget trickle down, aka trickle upon? or how about how we gave FREE MONIES TO GE who said "thanks" and then sent their best paying jobs overseas [truthdig.com] which I'm sure will buy the CEO some more gold toilets and hookers, but help America? Naaah.

If anything taxes on the top 5% should be HIGHER not lower! Money hoarded by the rich is "dead money" its not getting spent, its out of the economy, goodbye. When they will get the living shit taxed out of them if they keep it? Well then they invest it in their businesses so as to lower their tax debt, duh! Taxes have NEVER BEEN LOWER on the top 5%, not ever. Are we better off than those times of high taxes? Can you name ONE time your "give the rich more money" policy has EVER worked? Even one? We've had trickle down, voodoo economics, the "free trade" bullshit under Clinton, and of course Dubya cutting like there was no tomorrow. Are we better off? NO.

That horseshit might actually sell to someone that doesn't know history, has never been here, and of course your constituency which is the rich and the poor suckers in red states that think they are gonna be rich someday, aka "lotto mentality" but everyone else has seen this shit time after time after time only now sadly the Ds are just as sold out as the Rs to the rich so it is SSDD.

That is why I believe we will have our Arab spring, because the public no longer believes in your games. They don't vote NOT because they don't care, it is because they have lost hope that anyone will listen. And when the poor, which outnumber you by a good 10,000 to 1 and rising every day decide to fall behind our own version of Uncle Joe or the crazy Austrian? Well lets just say I hope you have your jet filled up because the fall of Saigon comes to mind.

First of all, the question is not whether to "give the rich people more money", but whether to take more money from them. Eliminating a tax exemption is raising taxes, so call it what it is.

Second, this tax hike will not take money from the rich - it will take money from you. The proposals under debate would raise taxes on oil companies, not "the rich". The oil companies are simply going to take that increase and pass it on to the price of oil, which raises the price of gas, which in turn will be paid by you and other poor shmucks all over the recession-hit-unemployed country.

Can you name ONE time your "give the rich more money" policy has EVER worked?

Can you name ONE time your "soak the rich" policy has EVER worked? Even one? Whenever you try to tax the rich, they always pass it on to you. Any business owner will pass the increased costs to the customers. A wealthy man can easily afford lawyers and accountants to find a way around the taxes. If no way can be found, he can pick up and move to another country - something you can't afford to do. In Maryland, for example, the governor recently decided to raise taxes on millionaires to raise revenue. Did any revenue get raised? Nope. Instead, the state's millionaire population was reduced in half. They just picked up and left. If any of them owned businesses, they probably took them too (that's not a public statistic, so I don't know)

In California, the governor decided to soak Amazon to get more sales tax revenue. Did that work? Of course not. Amazon stopped doing business in the state, taking all those "affiliates" and their jobs out of state. Here at least you have a plain example that raising taxes kills jobs. Here you can point to each business and say: the lost jobs went that way.

You mean like trickle down (80-88) voodoo economics (88-92) free trade with countries with no environmental laws (92-2000) and of course lets cut them taxes on the rich a lot! (2000-2008) and finally bailout baby bailout! (2008-present) like that?

Look at what the tax rates were during the best times of this country such as the 50s (which the Rs idolize) and today. You will see that taxes on the top 5% have never been lower not in the ENTIRE history of our tax system. Not once.

So if the libertarian/republican trickle down "Its the gubment!" theory held true, we are living in a utopia right now. Are we? hell in just the last 10 years with EVER lowering taxes on the top 5% we've lost 21,000 FACTORIES [businessinsider.com] even as the politicians tripped over themselves to give ever larger tax cuts to the top 5%, oh and the middle class? They are just about DOA [yahoo.com]. If the "give the rich more money" theory was sound, where are the results? Where is the trickle down?

Oh right it is actually trickle upon, as in they piss on the peasants while lining their pockets. well that is how revolutions get started my friends. ever hear a little ditty called "no taxation without representation"? Or what the tree of liberty needs to be watered with? If those at the top think the other 95% are just gonna go quietly starve to death in a corner you got another thing coming. Hell we have our own soldiers taking oaths to FIGHT THE GOVERNMENT that trained them! Think this is a coincidence? I think when the shit hits the fan they are gonna find like old Mo Mo the military? Well they got families too and they ain't rich.

It ain't gonna be pretty but perhaps it is just what this country needs. No government lasts forever, just look at how many they have been through in Asia and Europe. Maybe it is time to start over.

Defaulting on the debt won't fix anything. It will only break a lot more things. Many of which we can't afford to break.

It won't even stop the US from borrowing. It will merely continue to borrow to the maximum $15T limit. But every dollar it borrows will cost it a lot more. And what will be left to work with won't work as well to stimulate more revenue and regain the "nearly zero risk" rate the US borrowed against for centuries.

But we could just reduce the Pentagon + intel budget to $700B, $500B, then $400

And we could return to Clinton's tax rates, which were as obviously consistent with a growing economy as Bush's (ie. current) tax rates have been consistent with a collapsing economy.

Clinton had an economy artificially buoyed by the dot-com bubble. When this collapsed, Bush allowed a property bubble to take its place. Neither economy was supported by actual production, both were propped up by wild speculation.

You forget that the Tea Party had the power of FILIBUSTER! (by agreement, they didn't even have to do anything, just say they were filibustering and magically things more than just a simple majority to pass)

The Democrats never controlled the Senate, except for a period of a few months, and even then it was only if count Lieberman as a Democrat. The Republican willingness to abuse the filibuster led us to a state of minority rule, in which our country was held hostage by the representatives of barely over a third of its population.

This just indicates a lack of discipline and coherence in the Democrat side. They had almost 60 votes. They couldn't get deals with Republican defectors to overcome the filibuster (a traditional legislative tool dating back as far as I know to the establishment of the Senate) and I'm cool with that. As I see it, if they couldn't overcome the filibuster and pass legislation, then they didn't deserve that legislation.

The Tea Party wants a budget - they just want it to be balanced, rather than simply pile on more and more unsustainable debt.

No, their goal is to spare their corporate masters any hardship, the alternative is making us mere mortals bear the weight.

There are three ways to deal with not enough money in a budget. One is to go deeper into debt. They're refusing to allow that to happen, having finally seen how dumb that was, though when Bush was in office, they didn't mind flying wildly into the red.

The second is to increase taxes. The Bush tax cuts caused the debt crisis, so one would think that raising taxes as PART of the

"military contractors, lay off TSA, DEA, ATF, etc. " You mean they could remain on furlough until some heinous crime or terrorist act happens. Then Obama would get screwed. And those aren't the agencies driving the debt. 2/3 of the budget is ENTITLEMENTS. Fail to attack those means you do squat against the debt.

There is another aspect to the debt. The Bush tax cuts were enacted when they "could see surpluses as far as the eye can see". Well, that lasted...well...it didn't last. Why didn't it last? Two elements: (1) Bush never funded the wars, and (2) the Clinton years were the dot.com bubble. Regarding (2), there was deadlock between Congress and the White House, neither would agree to the other's spending plans. So they simply stopped increasing spending lest their enemies get the leg up in the next election.

In addition, the economy changed during the aughts. Companies shifted more of their operations overseas due to shortsighted Business School Product, and an antiquated tax structure that made it prohibitive for Big Business to invent in the U.S. The latter is open to speculation. Anyhow, the anti-regulation atmosphere of the Bush Years (although started under Clinton attempting to "triangulate") allowed investment banks to invade the loan market. They were aided by the credit rating agencies, and Congress who thought any business is good business. Their bright idea was to securitize (sp?) loans and sell them widely...with collateral "guaranteed by the rating agencies".

That alone wouldn't have caused the current mess.The missing element was the American people. Being greedy and too dumb to understand (or read) the fine print, they bought houses they couldn't afford, bought second houses, flipped houses, took equity out of their houses to piss off on large SUVs (thereby distorting the car market), etc.

This encouraged the Contractors. It used to be you found a contractor to build a house the bank decided, based on your financials, to loan you the money to have build. But in the rarefied atmosphere of no-one minding the store, mega-contractors took over. They will buy a 100 acres or more and build speculation houses (spec-houses). And the American people sucked them right up. Being dumb, you could buy one and think it was worth the purchase price. Being greedy, you could buy one with the intention of flipping it.

And now, the chickens have come home to roost. And everyone wants to point fingers. There is plenty of blame to spread around, and I've neglected several miscreants.

And the Tea Party is not intent on wrecking the economy. The economy is already wrecked, now we are only fighting on how to fix it.

i know they sound too simple, but that is basically what happened in the US from the 1930s to circa the 1980s, when it had the 'best financial system in the world'. the SEC & financial laws were somewhat well enforced (especially compared to every other country) and these companies had to show what they were doing in public.

that broke down with the rise of the 'shadow banking system' and the end of the rule of law, which many people will say began in circa the 1980s when the big investment banks stopped being partnerships and started being 'shareholder driven'. the rise of special purpose entities, collateralized debt obligations, off-balance sheet special investment vehicles, and other various creatures of the shadow banking system destroyed all semblance of transparency. modern large banks do not have any idea what their actual financial condition is - it is simply too complicated to properly calculate it or to know what they have at risk.

The US won't "default" no matter what happens. Enough tax money comes in every day to sustain the interest payments on the debt. The tough decisions politicians need to make are the budget cuts. Obama and the Democrats don't want to cut anything (except for defense). The elephant in the room is all those people on the welfare dole. "Entitlements" account for the vast majority of the budget. Does a millionaire retiree really need that $2000 social security check and medicare? Those programs should be means-tested. Otherwise, they're just Ponzi schemes that are approaching the inevitable demise of more people taking out than putting in.

For those who want to raise taxes, I ask you: When has a tax increase ever created a job? On the contrary, Reagan knew what Kennedy (JFK) knew: tax cuts INCREASES private investment, which increases jobs, which adds more TAXPAYERS to the system. We don't need more taxes, we need more people paying taxes. Obama can sing his class warfare song (rich vs. poor) all he wants but the fact of the matter is, rich people INVEST their money. That creates jobs. Confiscate their money through taxation and that's less money available to invest. It's really quite simple. I'm glad my boss is a millionaire. If he wasn't, I might be unemployed right now.

I used to agree with this line of thinking. The problem is the rich aren't investing in US companies. The current tax breaks are creating jobs they just happen to be in China.

If you have County A where there are minimum wages, and child-labor laws, and safety standards, and worker's comp, and unemployment, and a security net, and workers expect health care, etc, etc, and Country B where none of that is true...hiring workers will, by definition, be cheaper in Country B. This is an unavoidable fact.

Thus, if somewhere allow goods made in either country to be freely sold in a location (Be the location they're being sold Country A, Country B, or even un

tax cuts INCREASES private investment, which increases jobs, which adds more TAXPAYERS to the system.

Oh, the infamous Lafffer curve (too lazy to post a link to wikipedia, check it yourself). Too bad it has not been proved, nobody knows where the optimal point is (why they always assume the optimal point is with LESS taxes, and no with more?), and everything else. But it gives some people a good mantra to repeat and repeat.

As other post has already put, everyone is willing to make sacrifices and cut costs... unless it is in something that benefits them.

At least some people is honest and choses consequently "I want good public services and I'll pay the taxes needed to/I do not want good public services but I want less taxes instead". Others just say"If I pay less taxes then everything will magically solve". With the first people one can try to get to a common point, arguing with the later ones is just a waste of time.

Well there's some pretty good proof of the Laffer Curve in the form of some countries where the taxes are completely retardedly high, usually import taxes, and they just get completely ignored. Everyone finds/bribes a way around. Also a simple though experiment shows it must be true at some level. Consider:

If you were required to pay 100% of your income in tax, would you pay it all, and go homeless and starve to death, or would you find a way to avoid at least some if not all of the tax?

Even restricting yourself to the last 5,000 years of recorded human history, I think you'll find that something equivalent to taxation has been around since the time of the Pharoahs, and that it manifestly could not have constantly risen since then, or we'd be paying more than 100% of our income. And given that in the ancient world it *was* common to appropri

The Laffer curve is a miserable failure, as anyone with even the slightest knowledge of economic history can deduce.

The only private investments tax cuts will spur will be in paying accountants to find new and unique ways to hide the taxable income in esoteric financial constructs designed specifically for the wealthy.

At first I was going to mock your silly idea, but then I thought about it.

Essentially your idea is to have the government extract taxes from people equally by creating inflation, and thus taking money from everyone according to how much they have. It seems like a good idea on the surface, because we get rid of the expense of paying for the IRS, and it's fair: it taxes people according to their wealth.

In practice, it seems there might be obstacles. Countries like Zimbabwe and Brazil have tried similar schemes, and it seems to have had a real negative effect on their economies. Although it would seem fair, ultimately it would not be, because rich are much more capable of putting their money in inflation-protecting schemes, whereas the poor are hurt by constantly rising prices. Given these two considerations, I would be very cautious about moving the entire system over to that method quickly.

That is just an opinion that the vast majority of economists (and educated people) disagree with. Sometimes I wish we could send all the people like you to a separate country, so that you can screw up your own lives without affecting mine. Perhaps the feeling is mutual =). There is no tax, and no government in Somalia. Go for it.

Let me lay this crisis out for you. There are five federal government fiscal concepts you need to understand to understand what's going on. (1) Budget; (2) Budget Resolution; (3) Authorization; (4) Appropriation; (5) Debt Authorization. This establishes a kind of belt-and-suspenders-and-another-pair-of-suspenders Congressional control of spending. Why? As you can well guess, control over spending is a major political prize. Roughly speaking, the budget is analyzed

Guys, we already had the budget debt. Remember the whole 'tax cuts for the rich' Obama wasn't able to get removed? Remember that? Several months ago?

That was the fucking budget.

This is now the Federal government is attempting to operate with our democratically decided and constitutionally passed budget, and needing to borrow more money to do it. (As everyone knew they would.)

And now the right has decided to pretend it's time to make budget decisions again. The joke is, it actually almost is time again, for the 2012 budget. But not for how much we spend in 2011.

It's probably worth mentioning that we're basically the only country in the world where we actually have #5 as a separate process...most countries include, in #4, the authorization to borrow as much as needed to actually implement the budget.

Incidentally, people predicted this back during the budget fight, and that fucking idiot Obama just shrugged it off, because he can't get it through his head that the Republicans are goddamn assholes with no interest in actually running the country, and are, in fact, utterly willing to break it to tiny pieces to get reelected.

Obama offered a plan for $4 trillion in deficit cuts, with 75% coming from spending cuts (including cuts to entitlement programs). The Republicans turned it down, because in their minds even $100B a year in tax hole closures and rate increases is too much. They are now pursuing only a $2T deficit reduction package, all because they care more about their rich benefactors than the economy.

So don't go saying both sides are unreasonable. The Democrats have been perfectly reasonable. It's the tea-baggers that are the problem.

Indeed in a normal year the GOP would have jumped at that deal, which is because it's a rather extreme deal. I'm not familiar enough to comment on it too much, but the tax increases are pretty minimal and are mostly the result of closing loopholes.